Common cases: New market

- All right, here's the next case for you. We have a US-based client that owns a fast casual healthy eatery. The company's main market has been in New York City, but they've seen a decline in profitability over the past couple of years. The company has plenty of capital to invest, and so they're looking into the following three cities to move into. San Francisco, Nashville, and Austin. Which one should they move into? - Okay. So you said there's been a decline in profitability. What's been the biggest cost change? - The real estate prices in New York City have doubled. - Okay, that will definitely eat into your margins. Okay, is there anything else? - Yes, it's been a lot harder to get fresh ingredients into the city due to increased regulations and logistical nightmares within the city. - Okay. And what is the market share for an eatery like this in New York? - Well, they've seen a decline over the past five years from five billion to four billion. - Okay, and do you know the market share in San Francisco, Nashville, and Austin? - Sure. It is San Francisco has five billion with a 10% growth projection, Nashville has two billion with 5% growth, and Austin comes in at three billion with 10% growth as well. - Okay, perfect, thank you. And do you have an understanding of the potential market share in these cities? Trying to understand the revenue potential over the next five years, so I can give a recommendation. - Yes, San Francisco has 5%, Nashville with 15%, and Austin with 10%. - Okay. So based on these numbers, and a little bit of quick math, I think Austin is the best bet, because Austin has an expected revenue of $300 million. The way that I came to that was I just took the market size, multiplied it by the growth rate, and then multiplied that by the market share. - Okay, so what's your final recommendation? - Austin. I think they should open their next place in Austin. It has the most growth potential. And from a quantitative state, I think that they'll get the highest revenue there. And if we just look at circumstantial evidence, San Francisco is going to have the same logistical and regulatory nightmares that New York City has. And Nashville isn't quite as big as Austin, so there's not as much room for growth. They should move to Austin. - Great work.